Stocks X and Y have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT?

A)Stock Y pays a higher dividend per share than Stock X.
B)Stock X pays a higher dividend per share than Stock Y.
C)One year from now, Stock X should have the higher price.
D)Stock Y has a lower expected growth rate than Stock X.
E)Stock Y has the higher expected capital gains yield.

Question

Stocks X and Y have the following data.Assuming the stock market is efficient and the stocks are in equilibrium,which of the following statements is CORRECT? ​

A)Stock Y pays a higher dividend per share than Stock X. 
B)Stock X pays a higher dividend per share than Stock Y. 
C)One year from now, Stock X should have the higher price. 
D)Stock Y has a lower expected growth rate than Stock X. 
E)Stock Y has the higher expected capital gains yield.

Quizplus · Accepted Answer

As per the given data, Stock X has a higher dividend yield (2% vs. 1.5%) and expected growth rate (6% vs. 4%). However, this does not necessarily mean that Stock X will have a higher price one year from now as other factors such as market conditions and company-specific news can also impact stock prices. There is no information given about the expected capital gains yield of either stock. Therefore, the only statement that is explicitly true is that Stock X pays a higher dividend per share than Stock Y.

Stocks X and Y Have the Following Data